Horngrens accounting the managerial chapters 11th edition miller nobles test bank

A when the products are consumed or sold B when the accounting period they are incurred in comes to an end C when the products are transferred to the Work-in-Process Inventory account D

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Horngren's Accounting,11e (Miller-Nobles)

Chapter 18 Introduction to Managerial Accounting

AICPA Functional: Reporting

PE Question Type: Concept

H2 : Financial Versus Managerial Accounting

2) Financial accounting prepares reports for internal purposes, whereas managerial accounting provides information to external stakeholders

Answer: FALSE

Diff: 1

LO: 18-1

3) Financial statements prepared for investors and creditors often include forward-looking information because they make decisions based on a company's future prospects

Answer: FALSE

Diff: 1

LO: 18-1

4) Managerial accounting reporting by a public firm is required to follow the rules of GAAP and

guidelines of the Securities and Exchange Commission

Answer: FALSE

Diff: 1

LO: 18-1

5) A budget is a managerial accounting tool used in the planning process

Answer: TRUE

Diff: 1

LO: 18-1

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6) Financial reporting is typically much more detailed than managerial accounting

Answer: FALSE

Diff: 1

LO: 18-1

7) Which of the following is an objective of managerial accounting?

A) to generate a company's financial statements for tax reporting

B) to provide information to business managers to assist them in controlling their business

C) to provide information to shareholders to assist them with their investment decisions

D) to ensure that the reports produced for internal and external business purposes are GAAP compliant Answer: B

Diff: 1

LO: 18-1

8) Which of the following statements is true of managerial accounting?

A) The external stakeholders of a company are the primary users of managerial accounting

B) Managerial accounting information is used to help managers plan and control their operations C) An external audit by an independent CPA is required for managerial accounting information D) Managerial accounting information must comply with Generally Accepted Accounting Principles Answer: B

Diff: 1

LO: 18-1

9) Managerial accounting information for a company is primarily used by

A) its customers to understand the pricing of the product

B) its creditors to understand the credibility of the business

C) its employees to plan and control operations

D) its investors to make their investment decisions

Answer: C

Diff: 1

LO: 18-1

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10) Which of the following statements is true of financial accounting?

A) It provides information to investors needed for their investment decisions

B) It provides forward-looking information needed for managing and delegating operations

C) It focuses on detailed reports for parts of the company rather than the whole company

D) It focuses on planning and controlling day-to-day operations

Answer: A

Diff: 1

LO: 18-1

11) Managerial accounting includes the planning function Which of the following items would be part of the planning function of a business's managerial accounting?

A) comparing actual performance to previously budgeted amounts

B) creating detailed budgets

C) implementing operational plans

D) evaluating results of operations

Answer: B

Diff: 1

LO: 18-1

AACSB: Analytical thinking

12) Comparing actual performance to previously budgeted amounts is part of the

A) controlling function of managerial accounting

B) planning function of managerial accounting

C) reporting function of managerial accounting

D) organizing function of managerial accounting

Answer: A

Diff: 1

LO: 18-1

13) Which of the following is the primary objective of managerial accounting?

A) providing information that managers need to make operational decisions

B) providing historical data to investors and creditors

C) providing summarized results of operations

D) providing information to comply with laws and regulations of government bodies

Answer: A

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14) Which of the following is the primary focus of financial accounting?

A) providing information that managers need to make operational decisions

B) providing summarized information on operational results to investors and creditors

C) providing budgets for future periods

D) providing highly detailed information on product lines, regions, and divisions

Answer: B

Diff: 1

LO: 18-1

15) For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

Summary reports are prepared primarily on the

company as a whole, usually on a quarterly or annual

basis

Relevant information and focus on the future

Primary users include investors, creditors, and

Summary reports are prepared primarily on the

company as a whole, usually on a quarterly or annual

Relevant information and focus on the future MA

Primary users include investors, creditors, and

There is no requirement to follow GAAP MA

Diff: 1

LO: 18-1

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16) Define planning List and briefly discuss a planning tool that managers can use

Answer: Planning is the process of choosing goals and deciding how to achieve them The budget is a common planning tool The budget shows the expected financial impact of decisions and helps identify the resources needed to achieve goals

Diff: 1

LO: 18-1

AICPA Functional: Measurement

17) Management accountability is the manager's responsibility to the various stakeholders of the company to maximize profits

H2 : Management Accountability

19) Management's accountability to its suppliers and vendors is to

A) provide products to customers that are safe and free of defects

B) obey laws and pay taxes timely

C) provide a return on shareholders' investment

D) make timely payments and comply with contract terms

Answer: D

Diff: 1

LO: 18-1

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20) How is the management of a company accountable to its employees?

A) The management must provide products that are safe and free of defects

B) The management must provide a safe workplace

C) The management must ensure that it earns a net positive return on its investments

D) The management must ensure the business is environmentally responsible to its community Answer: B

Diff: 1

LO: 18-1

AACSB: Interpersonal relations and teamwork

21) Management of a company is accountable to for obeying laws and paying taxes

A) the natural environment

B) its asset vendors

C) the securities exchange

D) the government

Answer: D

Diff: 1

LO: 18-1

22) In which of the following ways is the management of a company accountable to its communities? A) making timely interest payments to creditors and dividend payments to investors

B) ensuring the company's environmental impact is not harmful to its community

C) providing a capital return on the shareholders' investment

D) repaying principal and interest to the suppliers

Answer: B

Diff: 1

LO: 18-1

AACSB: Information technology

AICPA Functional: Leverage technology to develop and enhance functional competencies

H2 : Today's Business Environment

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24) is a philosophy of continuous improvement of products and processes

A) Just-in-Time (JIT) Management

B) Enterprise Resource Planning (ERP)

C) Supply Chain Management (SCM)

D) Total Quality Management (TQM)

Answer: D

Diff: 1

LO: 18-1

25) Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?

A) Supply Chain Management (SCM)

B) Just-in-Time (JIT) Management

C) Enterprise Resource Planning (ERP)

Answer: B

Diff: 1

LO: 18-1

26) What is Total Quality Management (TQM)?

A) a philosophy of supplying customers with superior products and services

B) an exchange of information with suppliers and customers to create efficient and effective processes C) a software system that integrates a company's functions, departments, and data into a single system D) a system that speeds the transformation of raw materials into finished products

Answer: A

Diff: 1

LO: 18-1

27) An Enterprise Resource Planning system (ERP)

A) is a cost management system in which a company produces products just in time to satisfy needs B) requires the implementation of Total Quality Management

C) integrates all worldwide functions, departments, and data of a company into a single system D) cannot be implemented in service companies

Answer: C

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28) Which of the following correctly describes Just-in-Time (JIT) Management?

A) It is a production approach that maintains surplus goods at each stage of manufacture

B) It is an inventory purchase approach that seeks purchase discounts on buying large quantities C) It is a cost management approach that focuses on maintaining lean inventory levels

D) It is an inventory approach that stockpiles raw materials to protect against supply interruptions Answer: C

Diff: 2

LO: 18-1

29) Which of the following is true of Just-in-Time (JIT) Management?

A) It results in more storage and insurance costs

B) It is a system in which the company produces products only after receiving an order

C) It promotes surplus inventory to prevent production shut-down in case of supply interruptions D) It requires a surplus inventory of finished goods to ensure timely, or just-in-time, delivery to

customers

Answer: B

Diff: 2

LO: 18-1

30) Which of the following is a philosophy designed to integrate all organizational areas in order to provide customers with superior products and services, while meeting organizational goals throughout the value chain?

A) Supply Chain Management (SCM)

B) Just-in-Time (JIT) Management

C) Enterprise Resource Planning (ERP)

Answer: D

Diff: 1

LO: 18-1

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31) The entire sequence of activities that add value to a company's products and services is called

A) the value chain

B) the planning process

32) The IMA standards of ethical practice require managerial accountants to maintain their professional competence

Answer: TRUE

Diff: 1

LO: 18-1

AACSB: Ethical understanding and reasoning

H2 : Ethical Standards

33) The accountant for Myra Lido deliberately recorded operating expenses as operating assets in order to record a higher net income for the company As long as the amount of the misstatement was not material, this would not be considered unethical behavior

Answer: FALSE

Diff: 1

LO: 18-1

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35) Which of the following is one of the key standards of ethical practice published by the Institute of Management Accountants (IMA)?

37) You did not understand what the term accrual meant and failed to accrue the interest due at the end

of the year on the company's bonds Which of the IMA standards appears to have been violated here? A) integrity

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AACSB: Application of knowledge

H2 : Service Companies

3) Which of the following is true of service companies?

A) All costs of service companies are product costs

B) Service companies modify and resell products they buy from manufacturers C) Revenues of service companies are only recorded on cash receipt

D) Service companies carry no inventories of products for sale

Answer: D

Diff: 1

LO: 18-2

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5) Star Health, Inc is a fitness center in Oklahoma City In October, the company earned

$550,000 in revenues and incurred the following operating costs from 340 customers:

PE Question Type: Application

H2 : Merchandising Companies

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8) Merchandising companies, like service companies, do not have a Cost of Goods Sold account

Answer: FALSE

Diff: 1

LO: 18-2

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13) Product costs are expensed

A) when the products are consumed or sold

B) when the accounting period they are incurred in comes to an end

C) when the products are transferred to the Work-in-Process Inventory account

D) when the market value of products goes above the recorded value

Answer: A

Diff: 1

LO: 18-2

14) Which of the following is true of product costs?

A) They are expensed in the period they are paid

B) For external reporting, GAAP requires that they be expensed before the products are sold C) They are first recorded in an inventory account

D) For merchandising companies, product costs do not include freight costs

Answer: C

Diff: 1

LO: 18-2

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15) Crystal, Inc is a merchandiser of stone ornaments The company sold 6,000 units during the year The company has provided the following information:

Purchases (excluding Freight In) 305,000

Selling and Administrative Expenses 69,000

Beginning Merchandise Inventory 44,000

Ending Merchandise Inventory 42,000

What is the operating income for the year? (Round your answer to the nearest whole dollar.)

16) Define product cost How does a merchandising company treat these costs?

Answer: Product cost is the cost of purchasing or making a product The cost is recorded as an asset and then expensed when the product is sold

Diff: 1

LO: 18-2

17) Define period cost Give three examples of period costs of a merchandising company

Answer: Period cost is an operating cost that is expensed in the accounting period in which it is incurred Examples include sales staff salaries, advertising, store utilities, office rent, office equipment depreciation, property taxes and insurance for the office, and delivery expenses

Diff: 1

LO: 18-2

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18) Manufacturing companies have inventory accounts, but merchandising companies do not

Answer: FALSE

Diff: 1

LO: 18-2

H2 : Manufacturing Companies

21) Goods that have been started in the manufacturing process but are not yet complete are included in the

A) Finished Goods Inventory account

B) Work-in-Process Inventory account

C) Raw Materials Inventory account

D) Cost of Goods Sold account

Answer: B

Diff: 1

LO: 18-2

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22) Which of the following would appear as a line item on the income statements of both a merchandiser and a manufacturer?

23) Damsel, Inc is a large manufacturer of auto tires Damsel has provided the following information:

Beginning Finished Goods Inventory 18,500

Calculate the amount of ending Finished Goods Inventory reported on Damsel's balance sheet

Beginning Finished Goods Inventory $18,500

Add: Cost of Goods Manufactured 52,000

Cost of Goods Available for Sale 70,500

Ending Finished Goods Inventory $37,500

Diff: 2

LO: 18-2

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25) Partial income statements of Company A and Company B are provided below:

Cost of Goods Sold:

Beginning Merchandise Inventory $4,000

Ending Merchandise Inventory (5,500)

Which of the following statements is true?

A) Company A is a merchandising company

B) Company B is a manufacturing company

C) Company A is a manufacturing company

D) Company A is a service company

Answer: D

Diff: 1

LO: 18-2

PE Question Type: Critical thinking

26) The Work-in-Process Inventory account includes the

A) goods that are ready to be sold

B) goods that are partially completed

C) goods that have been sold in the market

D) goods that are damaged during production

Answer: B

Diff: 1

LO: 18-2

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27) Which of the following is true of Finished Goods Inventory?

A) Finished Goods Inventory is an account used by a manufacturer and includes completed goods that have not yet been sold

B) Finished Goods Inventory is an account used by a merchandiser and includes completed goods that have not yet been sold

C) Finished Goods Inventory is an account used by service companies in lieu of raw materials inventory D) Finished Goods Inventory is an account used by a manufacturer in lieu of raw materials inventory Answer: A

Diff: 1

LO: 18-2

28) Which of the following formulas represents cost of goods sold for a merchandising business?

A) Beginning Merchandise Inventory - Ending Merchandise Inventory = Cost of Goods Sold

B) Purchases and Freight In - Ending Merchandise Inventory = Cost of Goods Sold

C) Ending Merchandise Inventory + Purchases and Freight In - Beginning Merchandise Inventory = Cost

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29) Lakeside Manufacturing provided the following information for the month ended March 31:

Compute cost of goods available for sale

Cost of Goods Sold

Ending Finished Goods Inventory (9,500)

Diff: 2

LO: 18-2

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30) Poolside Manufacturing provided the following information for the month ended March 31:

Ending Finished Goods Inventory 10,500

Compute cost of goods sold

Cost of Goods Sold

Diff: 2

LO: 18-2

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31) Riverside Manufacturing provided the following information for the month ended March 31:

Compute gross profit

Cost of Goods Sold

Cost of Goods Manufactured 14,600

Diff: 2

LO: 18-2

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32) New Hope, Inc is a merchandiser of stone ornaments It sold 15,000 units during the year The company has provided the following information:

How much is the gross profit for the year?

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33) Robbinsdale, Inc is a merchandiser of stone ornaments The company sold 8,000 units during the year The company has provided the following information:

Purchases (excluding freight in) 300,000

What is the cost of goods available for sale for the year?

34) Bloomington, Inc is a merchandiser of stone ornaments The company sold 6,000 units during the year The company has provided the following information:

Purchases (excluding freight in) 300,000

What is the cost of goods sold for the year?

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35) Amber Corporation has provided the following information of its operating activities for the year: Merchandise Inventory, January 1 $150,000

Merchandise Inventory, December 31 75,000

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36) Planet Manufacturing provided the following information for the month ended March 31:

Cost of Goods Manufactured 10,600

Prepare the income statement

Answer: Planet Manufacturing

Income Statement Month Ended March 31, 20XX Revenues:

Cost of Goods Sold

Cost of Goods Available for

Sale 17,600 Ending Finished Goods

Inventory

17,600 Ending Finished Goods Inventory (6,500)

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37) Excellent, Inc sells accounting textbooks The following information summarizes Excellent's operating activities for the year:

Required: Prepare Excellent, Inc.'s income statement for the year ended December 31

Income Statement Year Ended December 31, 20XX

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38) Simons, Inc sells plasticware The following information summarizes Simons' operating activities for the year:

Merchandise Inventory on January 1 65,000

Merchandise Inventory on December 31 97,500

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Answer: Simons, Inc

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39) Best, Inc., a merchandiser, sells office supplies The following information summarizes Best's operating activities during the year:

Merchandise Inventory on January 1 30,000

Merchandise Inventory on December 31 20,500

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Answer: Best, Inc

40) List the three kinds of inventory accounts that are used by manufacturing companies Briefly discuss what each account includes

Answer: Raw Materials Inventory includes materials used to make a product

Work-in-Process Inventory includes goods that are in the manufacturing process but are not yet

complete

Finished Goods Inventory includes completed good that have not yet been sold

Diff: 1

LO: 18-2

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H2 : Direct and Indirect Costs

2) Direct costs and indirect costs can be easily traced directly to a cost object

Answer: FALSE

Diff: 1

LO: 18-3

3) The wages of manufacturing plant janitors are considered to be non-manufacturing overhead costs as these costs are not directly related to the manufacturing process

Answer: FALSE

Diff: 1

LO: 18-3

PE Question Type: Critical thinking

4) In manufacturing, the cost objects are often units of product

Answer: TRUE

Diff: 1

LO: 18-3

5) Which of the following will most likely be considered an indirect material cost for a bakery?

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6) Anything for which managers want a separate measurement of cost is called a

7) Define direct cost

Answer: A direct cost is a cost that can be easily and cost-effectively traced to a cost object

Diff: 1

LO: 18-3

8) Define indirect cost

Answer: An indirect cost is a cost than cannot be easily or cost-effectively traced to a cost object

Diff: 1

LO: 18-3

9) Product costs, such as factory overhead, should be treated as an asset until the product is sold Answer: TRUE

Diff: 1

LO: 18-3

H2 : Product Costs

11) Manufacturing overhead includes indirect manufacturing costs, such as insurance and depreciation

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12) All costs incurred in the manufacture of final products are product costs

Answer: TRUE

Diff: 1

LO: 18-3

H2 : Product Costs

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18) The salary of a manufacturing plant manager will be included in manufacturing overhead

Answer: TRUE

Diff: 1

LO: 18-3

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24) Freight costs paid to ship raw materials to a company warehouse are considered product costs Answer: TRUE

Diff: 1

LO: 18-3

H2 : Product Costs

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30) Repair and maintenance costs for manufacturing equipment are product costs

Answer: TRUE

Diff: 1

LO: 18-3

H2 : Product Costs

34) Period costs are the

A) product costs that must be paid in the accounting period in which they are incurred

B) costs that are incurred and expensed during the same accounting period

C) costs related to production of products the company purchases and sells

D) same as manufacturing overhead costs

Answer: B

Diff: 2

LO: 18-3

H2 : Product Costs

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35) Which of the following is an example of a period cost for a manufacturing company? A) advertising expense

B) depreciation on factory equipment

H2 : Product Costs

36) Which of the following is a part of manufacturing overhead?

A) cost of raw materials

B) wages of assembly line workers

H2 : Product Costs

37) Which of the following is a product cost for a manufacturing company?

A) salary of administrative staff

B) wages paid to factory janitor

C) commissions paid to sales staff

D) depreciation on corporate building

Answer: B

Diff: 1

LO: 18-3

H2 : Product Costs

38) Which of the following is a period cost for a manufacturing company?

A) office rent

B) wages of factory janitor

C) insurance cost of production equipment

D) raw materials

Answer: A

Diff: 2

LO: 18-3

H2 : Product Costs

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39) For a manufacturing company, which of the following is a period cost? A) direct materials used

B) office rent

C) wages expense of factory workers

D) indirect materials used

Answer: B

Diff: 1

LO: 18-3

H2 : Product Costs

40) Which of the following is an example of direct labor cost in a factory? A) wages of assembly line personnel

B) salary of vice president of production

C) wages of factory security guard

D) salary of production manager

Answer: A

Diff: 1

LO: 18-3

H2 : Product Costs

41) Which of the following will be included in manufacturing overhead costs? A) indirect labor and indirect materials used

B) salaries of salesmen

C) direct materials and direct labor

D) delivery costs to ship goods to customers

Answer: A

Diff: 2

LO: 18-3

H2 : Product Costs

42) Manufacturing overhead is also referred to as

A) indirect manufacturing costs

B) direct manufacturing costs

C) prime costs

D) period costs

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43) Kyanite Corporation, a manufacturer, reports costs for the year as follows:

Direct Materials Used $535,000

Wages to Line Workers 470,000

Indirect Materials Used 370,000

How much is the total period costs for Kyanite?

H2 : Product Costs

44) Daryl Corporation reports costs for the year as follows:

Direct Materials Used $390,000

Wages to Line Workers 225,000

Indirect Materials Used 785,000

How much is the total product costs for the year?

H2 : Product Costs

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